Tasmania’s crazy lurch back into the (expensive) fossil fuel era

Due to a combination of bad luck and rotten planning, old school thinking and – guess what – climate change, Tasmania has found itself turning to diesel generator to solve an energy crisis. The state is now paying as much for its power as a remote mine-site in outback Australia.

Only just recently, Tasmania – courtesy of its rich hydro resources, excellent wind conditions, and even a little bit of sunshine – could boast of being 100 per cent renewable, with all the economic possibilities that could afford in a world rapidly transitioning to a low-carbon economy.

The state had closed down its last fossil fuel generator, and the combination of a large hydro fleet (2,200MW), a growing portfolio of wind farms (310MW) and a small amount of rooftop solar (80MW) accounted for its electricity needs.

It supplemented and profited from these resources through the BassLink cable to the mainland, more for exporting clean power rather than importing from the heavily coal-reliant Victoria.

Analysts suggested Tasmania, with its giant hydro battery, was perfectly positioned to become a fully green state, becoming the first to use renewables to supply all electricity, road transport and many industrial processes. A green Apple Island, if you like.

All it would require was a bit of vision and forward planning – encourage rooftop solar, build more wind farms, use the green electricity as a prompt to accelerate the uptake of electric vehicles; maybe even build a new link to the mainland to become an export of green electricity.

Not any more. Due to a combination of bad luck and rotten planning, old school thinking and – guess what – climate change, Tasmania has found itself with little water in its dams to generate hydro electricity, no power link to the mainland, bushfires shutting down generators, and not enough renewables to fill the gap.

The Tasmanian government finds itself in the midst of an energy crisis – facing soaring costs and electricity rationing because it resisted a push to build new wind farms, and sought to put a lid on rooftop solar. It blithely believed that its dams would never fall to such critically low levels.

Last year, though, after Tasmania had pumped more hydro than it ever had to profit from the short-lived carbon price, Tasmania found itself short of water as the spring rains failed to appear, registering its driest period on record.

The state began to import more electricity from Victoria, and then the link to the mainland was suddenly cut in late December. No one knows when it will be repaired.

So what does it do in a crisis? Tasmania has no choice but to lurch back to the fossil fuel era. It switched back on its gas-fired power station early this year and has now begun to switch on containerised diesel gen-sets. Some of the first of which were switched on last Friday, to much fanfare.

Tasmania usually enjoys some of the lowest wholesale electricity prices in the nation, averaging around $40/MWh. The cost of imports from Victoria doubled that to around $80/MWh, and the re-commissioning of the gas-fired generator doubled that price again to around $160/MWh.

Since last week, when the first of the diesel generators was switched on, the wholesale electricity price has nearly doubled, yet again, to around $300/MWh.

The use of diesel generators, which sets the marginal cost of power (which is then paid to all other operating generators under the rules of the National Electricity Market) means that Tasmanians are paying the same price for generation than a remote mine in the Australian outback.

Note this graph below. For the last seven years, Tasmania has had the lowest prices of any state. But in the past week, the average price has remained at more than $250/MWh, barely any different from the peak. With the addition of network and retail costs, the cost of electricity is about $500/MWh. Rooftop solar probably costs around $150/MWh in Tasmania.

The crisis has sparked some interesting initiatives. Apart from having to fly in replacement parts for the gas-fired generators and diesel gen-sets from Abu Dhabi, the government is also accelerating its “cloud-seeding” program to try to bring forward some autumn rains.

It has struck agreements with three major industrial facilities and employers to shave more than 110MW of capacity from demand.

Curiously, notes Pitt & Sherry’s Hugh Saddler, unlike other responses in other countries faced with similar emergencies, no effort has been made to encourage household and smaller business consumers to increase the efficiency with which they use electricity.

Once another open cycle gas turbine is being returned to service in April, taking the total capacity of the Tamar Valley gas power station to 386MW – with a further 200MW of diesel generation, meaning well more than half of the state’s electricity supply will come from fossil fuel generation.

The first 100MW of diesel gen-sets alone will cost $20 million to install, $24 million for the hire of equipment, and around $11 million a month to operate. Only one-third of those costs will be recouped through energy sales. The actual cost will depend on how much diesel generation is actually used.

Industry analysts lament that this could have been avoided, with a bit of forward planning. Plans to build a 600MW wind farm in King Island were derailed by fierce opposition from anti-wind activists, mostly from the mainland.

But the amount of wind and solar energy could have been accelerated, particularly with the backing of hydro, which acts as a perfectly clean and cheap “battery” to balance out the fluctuations of wind and solar energy.

But while Tasmania is now prepared to pay nearly $300/MWh for diesel power, it has not been prepared to pay $80/-$90/MWh for new wind energy – despite its recent assertions that it is a supporter of wind power.

And the output of rooftop solar is still being valued at just $60/MWh, one-fifth of the price of diesel. The state’s pricing regulator recently said it could see no benefits from rooftop solar, and delayed an assessment on battery storage because it was “too hard”. Perhaps in its next review it might change its tune.

A year ago, the government said it could provide the equivalent of 1,00MW of “base-load” power to Victoria, substituting one of the big brown coal generators in the Latrobe Valley with clean power. Now it can’t even meet its own needs.

p.s. Tasmania, however, is not the only state suffering from the soaring cost of fossil fuel generation. Queensland’s wholesale prices are shooting up because there is little large-scale renewable energy generation and the state is forced to rely on gas-fired generators to supply the major new source of demand – providing power so much gas can be extracted and processed for export.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.

30 Comments

Too bad they didn’t dam the Franklin river. All that nearly free electricity would be helping Tasmania lead the world in eco-living. Creating swathes of jobs too. But hey, 600 people a year travel up the river so it must have been worth the stupidity?

Geoff Mosley 3 years ago

Hydro Tasmania sold its power when the dams were at 26%. Why? Apparently a good price trumped sustainable energy supply for Tasmania.

Maustrauser 3 years ago

Mike, can’t you read? The dams are empty because of climate change and stupidity from hydro Tasmania. Do you honestly think the Franklin Dam would have made much of a difference?

Yes, Bob Brown put the environment ahead of providing hydro energy to Tasmania. That was his call. Given El Niño it might not look like a bad decision. I will leave the Taswegians to decide what was the best decision for their island. Relying on Basslink was always a gamble. If they don’t use fossil fuels to balance their own network what other options do they have? Wind and solar? Maybe batteries? Maybe even SMRs. Watch this space.

JeffJL 3 years ago

Better wipe batteries and SMRs off the list.

Batteries do not produce power, they just store it. SMRs only exist in presentations. There have been none built, there are none being built. There are no designs which you could build one off just planning designs.

The Gordon below Franklin dam would have been lucky to add 200 Mw to the total capacity of the Hydro grid. What is the short fall?

Why would the G b F dam be full of water when all of the others are at record lows?

The Bass link and gas generator have provided up to 300 Mw which the remainder of the hydro could not supply. Tasmania has plenty of unused wind and solar resources which it chose not to employ. By what mis-placed loyalty do you defend this incompetence? Do you follow Tony Abbott’s religion? “Coal is good for humanity”?

Smurf1976 3 years ago

Assuming you are measuring average output (as distinct from peak power) then the answer is 178 MW for the first dam in that scheme and 360 MW for the total of what was proposed.

Hypothetically, had it proceeded instead of the other two (much smaller) schemes that were built then today Tasmania would be 95% powered by hydro instead of 79%.

There are also other options, including hydro and others, capable of achieving a similar outcome. It’s just a question of (1) cost and (2) actually building them.

As for droughts, well hydro can certainly be reliable under all past (including present) weather conditions *if* it is operated so as to achieve that outcome. The key is how it’s operated.

For that matter I should point out that the system as it stands today can also be extremely reliable if it is operated so as to achieve that.

Billy Ethridge 3 years ago

Tasmania’s problems make clear the necessity of having a variety of green power sources.

Phil 3 years ago

Even us “off grid” ALWAYS have a backup Genset

We just don’t use it much except in extreme poor daylight conditions as we design our systems correctly in the first instance along with split solar charger / inverters for redundancy

Even a tornado destroying all of our solar panels would be a short term event ( week at most) before replacing and running again.

A volcanic eruption with ash blocking the sun could be a several month long event , but it’s unlikely

Yet in Tasmanias case they were informed in no uncertain terms of this event being a Highly Probable event back in 2005 and they chose to do nothing about it.

People like Mad Monk Abbott followers in the Coalition, (and mike111ryan), who deny anthropogenic climate change and who oppose wind turbine and other renewable energy technologies, are the same type of people who would have dammed the Franklin.

Tasmania could have done so much more to advance renewable energy resources but not made easy when the Commonwealth Government(s) are so behind in their thinking.

600 people a year – what bullshit.

suthnsun 3 years ago

However the back casting works, right now, why hasn’t an executive decision been made to adjust the fit and prompt more solar installations. It would not take long to get another 200mw of pv installed if the price was providing some incentive ($100?). Adjust the transmission arrangements also and Tas could grow energy output and GSP without detracting from anyone. ( and fast track wind development – valid projects of ‘State importance ‘)

lin 3 years ago

I am sure that the Tassie state government would consider any amount of taxpayer money used to subsidise fossil fuel use cheap compared to losing major “donations” to the LibNats from the Fossils.

Yep, for every $1 donated by fossil fuel companies to Liberal, Labor and National Parties at a Federal level, gets returned to the tune of over $2000 in tax subsidies. That is a pretty good lobbying return.

Charles 3 years ago

“even a little bit of sunshine” – oh come on – plenty of sunshine here! 15 hour days in summer and more hours on average than Germany, one of the world leaders in solar.

Les Johnston 3 years ago

Risk management was poorly executed. Time for a re-evaluation based upon scientific knowledge rather than electoral funding sources. NSW had a similar past craving for gas turbines which quickly went out of service and electricity users paid the price for bad decision making.

Ian 3 years ago

The cost of rooftop of $150/ MWH appears too pessimistic .Here is a little calculation to show the cost to the government if it gave away solar arrays with a proviso that half of the electricity generated is exported to the grid for no Fit.

15 year life of panels etc, government bond 4.25%, energy production in Tasmania 5KWH per day for 250 days in the year= 1250 per KW installed per year, cost of array per KW: $7.50 per month 625KWH/12=52. 750/52=14.4.

The cost to the government would be $144/ MWH

MaxG 3 years ago

Stupid bureaucrats… if I were to run a project with this kind of risk assessment I would be unemployed immediately.

Glen S 3 years ago

These Liberals need to stop fluffing around and get some wind farms on the west coast built.

George Papadopoulos 3 years ago

Intermittent renewables are a “cheap” way to produce electricity. Its the cost of integrating them into the grid and using other backup sources that make them so expensive and unattractive to anyone with a rationale.

As far as King island, they did well to oppose a project which amounted to environmental sacrilege…

Geoff 3 years ago

and you watch, there will be no incentive from the TAS government to add more wind / solar to the TAS grid and will bind consumers to higher prices to help their fossil fuel friends out. they are laughing at the moment – I can hear them all the way from Sydney!

Mike Ives 3 years ago

‘Only just recently. Tasmania …. could boast of being 100 percent renewable’

Giles if you check the BASSLINK figures apart from when we had a carbon tax 2013-14 plus a small amount of energy exported to Victoria in 2011 we in Tassie have been a net importer of Victoria’s electricity. Up until the BASSLINK crash we have been doing so since 2005. We may have the turbine capacity to generate all our electricity needs here in Tasmania via that wonderful hydro source except we don’t have enough water. Dam levels have only once been greater than 50% during that period. In fact quoting from Electricity in Tasmania – A Hydro Tasmania Perspective 2009 ‘Average inflows in the ten years to 2008 were approximately 10% below average inflows in the preceding 20 year period (1976-1996) and 16% below average inflows in the 50 year period before that (1924-1975).

I for one of many in Tasmania would be delighted to see Tasmania become truly 100% renewable and ease my concern at least that it was truly doable.

Thanks Mike, probably not since 2005 as Basslink was only built in 2006. And yes, the 100% renewables was short lived, but it happened. And if more renewables had been built – as had been intended under the original Basslink plan before the then Coalition government killed the then MRET, then it might have been a permanent thing, even with declining hydro levels.

Mike Ives 3 years ago

Correct Giles thanks. I assumed Basslink started delivery right after comissioning in 2005 but according to Wikipedia it did not perform until April 2006